Taking Stock

Jeff has been reporting, analyzing and opining about the retail grocery business since 1973. He has served as publisher of Food Trade News and Food World since 1978 and as president since 2007. He can be reached at jeff@foodtradenews.com.

Lidl Unveils First ‘Smaller’ Discount Unit In Aberdeen, MD

Lidl, the German discounter whose 20-month foray into the U.S. has generally been disappointing on several levels, unveiled its first downsized unit last month in Aberdeen, MD.

The 25,000 square foot new store, which has been on the books since 2016, is located on Route 40 in the Harford County berg about a half mile from a smaller, six-year old Aldi unit and a large Walmart SuperCenter.

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By early 2018 Lidl had opened about 50 U.S. stores, many of which have been underperforming. Parent company Schwarz Group took notice and the discounter’s CEO Klaus Gehrig criticized his company’s U.S effort for choosing bad locations and not properly recognizing the shopping habits of U.S. consumers. Additionally, Lidl U.S. cut back on the number of stores it would open, fired its U.S. CEO Brendan Proctor and replaced him with veteran European executive Johannes Fieber. Lidl also said it would look to build smaller, more efficient stores in the 15,000-25,000 square foot range rather than continuing to open stores that were about 36,000 square feet in size. Lidl is also revising its real estate policy and now will lease new stores as opposed to its original plan of acquiring real estate and building stores on that site, a very costly proposition.

Lidl owns the site in Aberdeen, and the interior changes that come with a 35 percent footprint reduction are almost unnoticeable. However, the store’s exterior is quite different from the original U.S. design which Gehrig described as “glass palaces.” The architecture utilizes more brick than glass and Lidl merchandises its “Rethink Grocery” on the front of the store along with its distinctive yellow, blue and red sign.

And unlike many Lidl stores, business has been very good during the first three weeks. As is the case with many other Lidl units, the retailer’s in-store bakery is the highlight of the store. But unlike its more than 50 stores in Virginia, North and South Carolina, there is no beer and wine department because of state law restrictions, something that the discount merchant also faces as it expands into Pennsylvania, Delaware and New Jersey.

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During the past month Lidl opened its first two Georgia stores (giving the chain 66 units in the U.S.) and closed on its first U.S. acquisition, the 27-store purchase of Best Market whose stores are primarily located on Long Island. The company said it would begin converting those perishables-driven supermarkets to the Lidl format this spring with the process continuing for 2-3 years.

Although I’ve been among Lidl’s biggest critics (my main complaint echoes Gehrig’s bemoaning of the lack of understanding of the U.S. consumer), it’s way too early to count the company out. Not with its tremendous success in Europe and its deep well of capital.

Clearly, the company should have never been “all-in” on acquiring its original real estate. Huge infrastructure commitments including four distribution centers and a palatial headquarters office in Arlington, VA could have been tempered, too.

With its other Maryland store in Bowie doing relatively well, too, Lidl is clearly learning from its initial U.S. misreads. However, as we all know, Lidl is still the new kid on the block and as such is climbing uphill against an overstored, diverse group of retailers.

‘Round The Trade

A deeper dive into Amazon’s recently released fourth quarter results saw a dip in its brick and mortar stores’ performance. Not surprisingly though, “Godzilla’s” overall sales and earnings were once again explosive as the Seattle-based juggernaut’s earnings jumped to $3 billion compared to profits of $1.9 million in last year’s Q4. Overall sales rose an impressive 20 percent to $72.4 billion. However, revenue at its 476 Whole Foods Markets, its nine Amazon go stores, its 18 Amazon bookstores, its three 4-Star outlets and its 87 Amazon Pop-Up units decreased 3 percent year-over-year. While I can make a pretty good argument that Amazon hasn’t done much to improve WFM, it should be noted that it’s still early in the game (20 months) and just by linking “Prime” members’ deals with its largest brick and mortar segment, there’s future gold in that relationship. However, the true bigger picture is the incredible numbers that Amazon continues to post with its core online silo. Sales for the quarter were nearly $40 billion in that segment, a 13 percent increase over 2017. And for the full year, volume jumped 31 percent to $232.9 billion. That’s enough reason for Amazon CEO Jeff Bezos to smile …and while we’re on the subject of online-related activities, IRI reported that grocery e-commerce sales for consumer packaged goods increased 35.4 percent in 2018. According to the IRI research: “Pure-play retailers garner more than half of all online purchases, but traditional brick and mortar retailers continue to invest in the commercial pie. It is incumbent upon the future success of these traditional retailers to invest in the shopper experience both in-store and online,” noted Sam Gagliardi, who heads e-commerce for the syndicated data firm…and how could I not connect e-commerce with my recent annual trip to FMI Midwinter held at the “overgolded” Trump National Doral resort in South Florida. You’ve got to give FMI CEO Leslie Serasin and her team a lot of credit for turning what was seemingly a directionless large trade association five years ago into a well-run, profitable, cutting edge entity. Although most of the meetings that I attended featured members of the “30/30” club – 30-year olds with 30-pound brains – I found many of the areas covered to be too conceptual and feel there should have been a greater retailer presence on some of the programs. Yes, I realize that IRI, Accenture and Nielsen are sponsoring some of the panels (nobody knows better than me that you’ve got to take care of your advertisers) and I don’t want to too critical of what is certainly useful information, but as one retail CEO said: “Have any of these speakers had any P&L responsibility in the food retail area?”…and one of Donald’s former employers, Walmart, is improving its “time off” policy for its associates, giving workers more flexibility to miss time while also rewarding associates who show up show up more often by providing bonuses ($550-$900 per quarter). Last year, the Behemoth raised its minimum wage (to $11 an hour) for all of its 1.1 million hourly employees. Walmart is the country’s largest private employer…Albertsons is making progress in its effort to grow sales and reduce its giant debt load. The Boise, ID-merchant, the nation’s second largest pure-play supermarket chain, saw overall sales increase 1.8 percent in its recently ended third quarter. Earnings also bounced back from the previous period’s $32.4 million loss; this quarter’s profit was $45.6 million, ID sales grew 1.9 percent and Albertsons’ e-commerce business grew 73 percent year-over-year. Late last year Albertsons refinanced its primary term loan and paid off some debt. Additionally, it raised $600 million through the sale and subsequent leaseback of five distribution centers. “We continue to gain traction in our efforts to deliver a seamless shopping experience for our customers in both the four-wall and no-wall environment. The third quarter marked our strongest identical-sales increase since the first quarter of fiscal 2016. Identical sales grew for the fourth consecutive quarter, and adjusted EBITDA grew over 50 percent compared to the same quarter last year, as the business has rebounded from fiscal 2017. We achieved a record-high sales penetration rate on our Own Brands products as we continue to delight our customers with our portfolio of award-winning brands,” said Jim Donald, who was named Albertsons’ chief executive in August. Donald has a daunting task ahead of him as he tries to either take the company public or find another partner to merge with after a proposed union with Rite Aid collapsed last summer. And despite the positive financial results and the paring of about $1 billion in debt, Albertsons’ debt load still stands at $10.6 billion…Target is shaking things up a bit and has promoted Stephanie Lundquist to president of its food and beverage unit, a new post. Lundquist has been with the Minneapolis mass merchant since 2005 and most recently served as chief HR officer. In her new role, she’ll oversee all food and beverage merchandising including strategy development and implementation. She’ll be a busy bee, because even with slight improvements made over the last 12 months, Target really needs help when it comes to its approach toward and presentation of grocery…interesting presentation by Kroger chief executive Rodney McMullen at last month’s National Retail Federation (NRF) show in NYC. McMullen was bullish about his company’s effort to utilize both backroom and consumer-driven digital initiatives. He added that as consumer demographics and habits shift, Kroger is more willing to experiment with different approaches and partnerships such as the recent initiatives announced with Walgreens (grocery pickup depots at 13 Walgreens drug stores) and Microsoft (to market a commercial ‘Retail as a Service” connected store experience). McMullen also painted an accurate picture of the mindset of today’s consumer, noting that “they feel incredibly good about the economy but very nervous about where things are headed.” I wonder if he was referring to just the economy or was inferring some concern about the political direction of the country?…Save-A-Lot has relocated its corporate headquarters from Earth City, MO to nearby St. Ann, MO and has confirmed it has riffed about 100 associates. It’s not been a good run for the limited assortment discounter which has struggled since Canadian hedge fund Onex Corp. acquired the company from Supervalu in 2016. Thank goodness for Save-A-Lot licensees which continue to outperform the retailer’s corporately-owned stores…in what some observers see as an anti-Amazon move, New Jersey is close to signing into law a bill that would ban most stores in the Garden State from becoming cashless operations. Amazon and other progressive retailers like the cashless concept as it improves efficiency and reduces the risk of robbery. However, some consumer groups contend that cashless stores discriminate against the poor who don’t have access to credit or debit cards and seniors who aren’t comfortable paying with digital devices. Similar bans are currently being considered in New York City and Philadelphia….he’s baaaaack – just before presstime, the U.S. Bankruptcy Court in New York approved “Slow Eddie” Lampert’s $5.2 billion offer to re-acquire Sears Holdings. The new deal will allow Sears to keep about 425 stores open and preserve 45,000 jobs. Since “Slow Eddie’s” offer was the only semi-legitimate one that the court received, it opted to give him another shot. Anybody wanna bet on this guy again?

Local Notes

It looks like it will take a bit longer for the winners in the Shoppers’ sweepstakes to be announced. Although final bids were reportedly due by last November, sources tell us that parent company UNFI is still sorting through some due diligence issues before they make the final announcement. That may be true, but several retailers who bid on multiple Shoppers units have confided to me that they have been unofficially told that their bids concerning specific stores were successful or unsuccessful. Of course, UNFI might be waiting a bit longer in the hopes of attracting more interest in stores that were underbid or received no bid at all. And it’s perfectly logical that leasehold/landlord items, pension fund concerns and union issues could also be creating the delay…Sprouts Farmers Market, which could be in on the Shoppers bidding, has announced that it will add two more Mid-Atlantic units to its roster. New locations include stores in Herndon, VA and Marlton, NJ. All told, the Phoenix-based natural and organics merchant plans to add 30 new stores this year, including four units in Florida and California that will feature Sprouts’ newest operational and design enhancements highlighting department destinations and promoting customer engagement throughout the store. The design, which maintains center-store focus on produce, debuted last year in five locations…our lead story this month focuses on the recent successes and e-commerce initiatives of Ahold Delhaize USA. One more item to add to the list: Stop & Shop announced that, perhaps as early as this spring, it will be unveiling a fleet of driverless vehicles in the Boston area that will allow customers (using a smartphone app) to command a modified food truck to park outside their homes where they then can personally select a limited group of items (mainly perishables) that they procure in a checkout-free manner. “This is one way in which we’re leveraging new technology to make shopping easier for our customers —by essentially bringing the store to them. We also recognize that many of our customers want the opportunity to make their own choices when it comes to fresh produce, and we’re proud to be the first retailer to engage with (developer) Robomart to address our customers’ needs with their cutting-edge solution,” said Stoppie’s president Mark McGowan. However, according to a story in the Boston Globe, Stoppie might may waiting a little longer than anticipated to get the program rolling. According to the story, Robomart has not done the necessary due diligence because William M. Strauss, the state representative who chairs the joint committee on transportation, said a remote-controlled delivery service would need multiple approvals from state agencies, the State Police and local police in communities where the vans would operate. Robomart said it does not plan to apply for a special permit because its delivery vans will still be operated by humans – just not from inside the vehicles. Strauss indicated that the state legislature would likely need to adopt new laws specifically for remote-controlled vehicles. “Until then,” he noted, “they shouldn’t be allowed on the road…Seasons Kosher Supermarket, which filed for bankruptcy last fall, has a new owner for its Pikesville, MD location. Shalom Rubashkin, a Brooklyn, NY meat entrepreneur, is expected to be part of the new group that takes ownership of the 25,000 square foot northwest Baltimore location. Apparently, the other six Seasons stores, which are located in Metro New York/New Jersey, are being acquired by Joseph Bistritzky, CEO of Maramont Corp., a foodservice organization also based in Brooklyn…Weis Markets last month launched a new price reduction program. The Sunbury, PA-based regional merchant said it has lowered prices on more than 7,000 private label products in every department in all of its 202 stores. “We understand saving money has never been more important for our customers,” said Richard Gunn, Weis Markets’ senior VP-merchandising and marketing. “That’s why we are making a multi-million-dollar investment to provide the lowest price in the market on more than 7,000 everyday products.” Weis also announced it has closed its store in California, MD (St. Mary’s County) which was part of the 38-store Food Lion package the retailer acquired in 2016. Also closing one its four stores is Musser’s Markets, which shuttered its 17,5000 square foot unit (its smallest store) in Columbia, PA (Lancaster County). The family-owned independent will continue to operate its other supermarkets in Lebanon, PA; Buck, PA; and Mountville, PA…from the obituary file this month we have learned that Sam Landsman has passed away at the age of 95. Landsman, whose son Jeff is a food broker based in Baltimore, was one of the pioneers of the frozen food industry. He worked with such iconic frozen innovators such as Clarence Birdseye, C.F. Seabrook, John Fox and Murray Lender. Later, he began importing fruit from Israel and for several years was the largest food importer from Israel to the U.S. In addition to his son, he leaves his wife of 76 years Rhoda, five other children, 13 grandchildren and five great-grandchildren…Marion Wormer is dead. Well, actually, Verna Bloom, the actress who played the wife of Faber College Dean Vernon Wormer (actor John Vernon) in the iconic movie “Animal House” (1980), has left us. In one of the most hilarious scenes in the film, suave fraternity member Otter (Tim Matheson) runs into Mrs. Wormer in the local supermarket produce aisle and begins talking about the store’s cucumbers as they approach that area of the supermarket. Here’s some of the ensuing dialogue: Otter: “My cucumber. It’s bigger. I think vegetables can be very sensuous, don’t you? Marion Wormer: “No, vegetables are sensual. People are sensuous.” Otter: “That’s what I meant. My name’s Eric Stratton. People call me Otter.” Marion Wormer: “My name is Marion. They call me Mrs. Wormer.” Otter: “We have a Dean Wormer at Faber.” Marion Wormer: “How interesting – I have a husband named Dean Wormer at Faber. Still want to show me your cucumber?” In a subsequent scene, she attends a frat house toga party and ends up in bed with Otter. Actually, Verna Bloom was serious stage and screen star, whose superb acting could be seen in an excellent and highly underrated film – “Medium Cool” (1968) – a semi-documentary about the rioting during the 1968 Democratic National Convention in Chicago. Bloom was 80 when she passed…our sympathies to the family of John Laytham, the co-owner and CEO of Clyde’s Restaurant Group, one of the Washington area’s top restaurant organizations. Having spent a lot of time (and a substantial amount of dinero) at several Clyde’s locations, we got to know John pretty well over the last 40 years. He began as a dishwasher 55 years ago at the original Clyde’s location in Georgetown while attending Georgetown University and, along with founder Stuart Davidson (who died in 2001), helped grow the regional chain to a $135 million per year operation with 13 restaurants. Well-read, highly intelligent and witty, John Laytham, 74, was the true embodiment of entrepreneurship. May he rest in peace…one of the toughest, most competitive and greatest baseball players of all time, Frank Robinson, has passed away at the age of 83. Robinson played for five teams in his 21-year career and remains the only player to be named an MVP in both leagues. He was also a rookie of the year, triple-crown winner, member of two World Series championship squads, first ballot Hall of Famer and baseball’s first black manager. Robinson’s grit and tenacity made him one of the most feared and respected players in the game during a career that spanned from 1956 to 1977. During his six-year tenure in Baltimore, Robinson proved to me that he was the greatest player ever to wear an Orioles uniform…I guess the old adage “ashes to ashes, (saw)dust to (saw)dust” would apply to the passing of Alfred J. Dunlap, 81, f
ormer CEO of Scott Paper and Sunbeam. Dunlap, who was hired from Scott in 1996 (he was responsible for selling Scott to Kimberly-Clark for $9 billion, a deal in which he earned $100 million for himself) to turn around the struggling appliance manufacturer, quickly justified his nickname of “Chainsaw” by whacking scores of employees, closing facilities and ruling with a type of autocratic authority rarely seen in business at that point. It was those aggressive tactics (and highly abrasive management style) that ultimately led to an SEC investigation alleging accounting fraud. He subsequently was fired by Sunbeam, now called Jarden, and agreed to pay $500,000 to settle the SEC’s charges.